Prospects for international pork trade look good for the 3rd quarter of 2017. That message was released by Rabobank, an expert bank with regard to agricultural commodities.
“The global pork market is relatively stable, with rising supply from the Americas easily absorbed in the main import markets in Asia, resulting in a steady development of the Rabobank Five-Nation Hog Price Index,” the bank wrote in a press release about the publication of its Rabobank Pork Quarterly Q2.
The bank stated that continuing strong Asian imports are supporting pork prices across the globe, with the supply volume in each region determining the actual level.
“The overall outlook is positive right now,” said Justin Sherrard, the bank’s global strategist animal protein at Rabobank. “The demand market will continue throughout Q2, supporting margins along the supply chain.”
China: Production relocation continues
The steady, regulatory driven relocation of pork production will support good price levels and stabilise imports in the coming months. Local supply will start to recover in the third quarter, with investments of recent years coming on-stream and reaching their potential.
EU: Elevated prices due to pressured supply
The European pig market is booming, with rapidly rising prices due to pressured supply. This situation will continue towards summer, with record piglet prices during the first quarter of 2017. Exports remain the wild card for the market’s price top, with high prices limiting the competitive position and resulting returns.
United States: Export to determine price level
The forecast 4% increase in pork production in 2017 is the driving force in the US pork industry. With consumption moving to record levels, exports will determine the final price level. Current low prices are supportive and also challenge supply from the main export competitor, the EU.
Brazil: Limited impact of scandal on exports
Brazil is steadily growing its position in pork export markets, with rising volumes flowing into all main destinations, especially China. The recent meat scandal has had little, if any, impact on export volumes and related prices.
“Over the last decade, pork production systems have diversified in many countries, with a commodity focus making way for more specialised production,” said Mr Sherrard. The press release stated that the report provides an analysis of the development of pork concepts and their implications for the supply chain going forward.
Until recently, the global pork industry was relatively straightforward for many years, Rabobank wrote in the press release, meaning that as much pork as possible was produced on one hand and on the other it was sold to the highest bidder globally.
Productivity, volume, and price of an increasingly ‘lean’ product were the key variables, according to Rabobank. This resulted in an interchangeable commodity product and growing competition.
That traditional production approach is, however, changing, in response to some consumers’ concerns around animal welfare, human health, and the environment. In addition, some farmers were not happy with the volume and price ‘squeeze’.
Furthermore, food safety scandals increased retail and foodservice demand for improved product tracking & tracing. This is not only observed in the developed world, but – due to social media – also increasingly in the cities in the developing world.
These factors resulted in the development of new production systems, or concepts, Rabobank predicted. Concepts would differ from traditional production systems and each other, with specific requirements regarding animal health, human health/healthy eating, food safety, medicine use, etc., or are produced for a specific retailer/foodservice supplier.
Rabobank closed off its press release stating that initiators are farmers looking for a steadier and (hopefully) a higher margin, slaughterhouses safeguarding sales channels, or retailers setting up dedicated supply chains to have 100% tracking & tracing or for specific niches.